New Delhi: Will Railway Minister Suresh Prabhu increase passenger fares and freight tariff? That's the question that pops up as he presents his ministry's annual budget for the next fiscal amid shrinking margins, that is leaving little room for modernisation, upgrade and safety.

In the previous budget, the minister spared passengers from a fare hike, but freight rates were increased by 2.1 percent to 10 percent, even on commodities such as grain, pulses, urea and coal. And in July 2014, the hikes amounted to 15 percent in passenger fares and 6.5 percent in freight.

Industry chambers have advocated a hike in passenger fares this time. Introduction of new trains without much capacity addition in terms of new lines has become a norm. The issue that Prabhu will have to tackle is to improve the operating ratio that spells out how much of the revenue generated is spent on day-to-day operations.

In the last budget, the minister had targeted to bring the operating ratio down to 88.5 percent, or the lowest in nine years, from an unsustainable level of 93.6 percent in 2013-14 and 91.8 percent for 2014-15.

The network length of Indian Railways has also not expanded in the requisite manner. It has increased just 0.06 times since 1989-90, but passenger and freight traffic has increased 3.3 times and 2.2 times, respectively. The average train speed of 25 km per hour for freight and 70 km per hour for passengers is also among the lowest globally.

Some of the other issues that stakeholders expect Prabhu to address include introduction of more wagons, development of physical infrastructure, fine-tuning the public-private partnership model, improvement of passenger amenities and making rail transportation competitive.